A Disease Of The Pocketbook

MONEY SENSE

Knowing The Syptoms May Help You Avoid The Ailment

February 22, 1989|By Dick Marlowe of the Sentinel Staff

An epidemic is sweeping into Florida, and the disease is building resistance to all known ways of fighting it off. It hits adults in all age groups and seems to prefer sophisticated city folks over citizens of rural areas and small towns.

More than 500,000 Americans came down with it last year, and cases are increasing at the rate of 11 percent a year.

The disease: personal bankruptcy. For some reason, personal bankruptcy seems to be on the increase in boom states more than in the areas where the economy is quieter. That is partly explained by the fact that the epidemic has already hit hard in states like Louisiana and Texas - and because people who have filed for bankruptcy once are not likely to do it again any time soon.

Florida, unfortunately, is again on the list of the ''hot states'' where things are popping in personal bankruptcy. From July through September last year, the first quarter of the official bankruptcy year, filings were up 22 percent in Florida. That is double the national average increase of 11 percent. What that means is that 5,255 Floridians filed for personal bankruptcy in the three-month period, compared with 4,303 non-business bankruptcy filings in the same quarter a year earlier.

As bad as things are here, they were much worse in Massachusetts, which had a 49 percent increase, and Maine, with a 32 percent jump. No one has a good explanation for why so many people are spending more than they make and flooding the bankruptcy courts.

On the other hand, a recent study of the Bureau of Labor Statistics has uncovered some very interesting facts. It found a very small gap between the living standards of people with low incomes and of those who make a bundle. In short, low-income families are not about to pass on making a purchase simply because of lack of money, not when credit is easy and paying for things can be put aside until that big raise comes or the lottery numbers hit.

Another mistake many low-income families make is not adjusting spending habits when their lives are interrupted by an unexpected decline in income because of illness or loss of a job.

Because the bankruptcy bug has a way of slipping up on the unwary, the Consumer Credit Institute of the American Financial Services Association has come up with a pretty good do-it-yourself kit for determining whether you fit the profile for being bitten.

The first warning sometimes comes when a family sees that it is not paying bills on time and is juggling the bill-paying each month. It is also a sign that you have a problem if you are making only the minimum payments on oversized credit-card bills. It should be regarded as a serious red flag if you do not know how much you owe.

You are seriously at risk if you are living it up on two incomes without putting anything aside for emergencies. As the bumper sticker says, ''Things happen.'' The bankruptcy sniffles are warning that they are about to erupt into a full-scale case of trouble when you begin to use overdraft credit on a checking account to pay the bills.

And you are ready for the treatment when you are being denied credit because of a negative credit report.

Those are pretty good tips, and I can add an unofficial one: You are at the brink if you have noticed that domestic arguments over money are getting loud enough to wake up the children and get the attention of the neighbors.

The time to take action is the day you spot the first symptom. According to a survey by the National Resource Center for Consumers of Legal Services, the average personal bankruptcy costs about $616, and an uncontested divorce comes to around $506. It is important to know both figures, because the former can lead to the latter.